Schizophrenia is a chronic, severe, and disabling brain disease which is characterized by symptoms which cause altered reality perception, cognitive deficits, and impairment in social or vocational functioning. In addition to clinical symptoms, schizophrenia can be accompanied with nocturnal characteristics which could manifest during dreaming. Using both questionnaire-based measures and laboratory REM sleep and non-REM sleep awakenings, we sought to characterize the dream content of 14 participants with schizophrenia under atypical antipsychotic medication. Results were compared with those from 15 healthy individuals. The relationship between dream content and daytime functioning in schizophrenia was also explored. Questionnaire data revealed that when compared to controls, patients with schizophrenia report experiencing a greater number of nightmares. Laboratory awakenings revealed that there was no significant difference between the two groups in the number of dream reports with reportable content, regardless of the sleep stage in which dreams were collected. In addition, when compared to their REM dream counterparts, both groups’ non-REM dream reports were shorter and included significantly fewer reportable items on several content scales. Laboratory REM and non-REM dream narratives from the patients were shorter and, after controlling for report length, most significant differences in dream content between the two groups disappeared. Patients with schizophrenia spontaneously rated their dream reports as being less bizarre than did controls, despite a similar density of bizarre elements as scored by external judges. Finally, both groups had a comparable density of rapid eye movements during REM sleep but a significant positive correlation between eye-movement density and dream content variables was only found in controls. Taken together, these findings suggest that dream content characteristics in schizophrenia may reflect psychopathological parameters specific to this disorder.